County Taxes - Business Tax Credits

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Our County Department of Finance is here to assist you in the tax credit application process and to ensure that you get the biggest dividend for your business. Take a look at the program descriptions below to determine which of these programs is right for you. This brochure should answer many of your questions and help you initiate a request. If you have further questions, please direct them to:

New Jobs Tax Credits & Enhanced New Jobs Tax Credit

This program — consisting of the New Jobs Credit and the Enhanced New Jobs Credit —benefits businesses that are planning to increase both their space and their staff.

New Jobs Tax Credit Eligibility Requirements

This six-year credit is available to businesses that increase their space by at least 5,000 square feet and their employee count by at least 25 new jobs. Businesses that are already resident in theCounty or that are moving from outside of Maryland are eligible to apply. The credit is not available to businesses that move to Montgomery County from another Maryland county or from Baltimore City, and it is not available to retailers.

The company must hire the 25 new permanent full-time employees during a 24 month period during which the company takes possession of the new or expanded premises.

A business seeking either the New Jobs Tax Credit or the Enhanced New Jobs Tax Credit must notify the County of its intent to seek the credit before expanding its space and staff.

Calculation of the County Tax Credits
The credit is based on the increase in both real and personal property tax assessments resulting from the business’s expansion. The credit decreases over six years, as follows:

Years 1 and 2: Credit = 52% of tax attributable to the assessment increase
Years 3 and 4: Credit = 39% of tax attributable to the assessment increase
Years 5 and 6: Credit = 26% of tax attributable to the assessment increase

State Tax Credit

New Jobs Tax Credit recipients also are eligible to receive an additional State tax credit, which uses the same calculation method. However, the State credit is given against one of the following taxes:

corporate or personal income taxes

financial institutions franchise tax

insurance premiums tax

The amounts for the State tax credit are as follows:

Years 1 and 2: Credit = 28% of tax attributable to the assessment increase
Years 3 and 4: Credit = 21% of tax attributable to the assessment increase
Years 5 and 6: Credit = 14% of tax attributable to the assessment increase

Enhanced New Jobs Tax Credit Eligibility

This 12- year credit is designed to benefit very large expansion projects and is available to businesses that meet at least one of the following three sets of requirements:

A company in a qualified industry (noted below) may:

Increase its space by at least 250,000 square feet;

Create at least 500 new permanent, full-time positions if it already has at least 2,500 existing permanent, full-time positions; and

Pay all these employees at least 150% of the federal minimum wage; or,

A company in a qualified industry (noted below) may:

Increase its space by at least 250,000 square feet;

Create at least 1,250 new permanent, full-time positions; and

Pay all these employees at least 150% of the federal minimum wage; or,

A company in a qualified industry (noted below) may:

Expend at least $150 million to increase its space by at least 700,000 square feet;

Create 500 new permanent, full-time positions if it already has at least 1,100 existing permanent, full-time positions; and

Pay all these employees at least 150% of the federal minimum wage and provide each employee a subsidized health care benefits package.

To qualify for the Enhanced New Jobs Tax Credit, a business must be engaged in one of the following qualified industries:

the operation of central administrative offices or a company headquarters

a public utility

warehousing

business services

Calculation

A business has six years from the notification date to create and fill the required number of new jobs and acquire and inhabit the new space. When this is accomplished, and the company has notified the County Department of Finance, the business will begin receiving the credit. The Enhanced Tax Credit, like the regular New Jobs Tax Credit, is given against the local real and personal property tax and is based on the amount of additional taxes due as a result of the business’s expansion.

Unlike the regular New Jobs Tax Credit, however, the Enhanced Tax Credit is calculated at the same rate for all 12 years. The County tax credit rate is 58.5% of the additional local tax liability.

State Tax Credit

The State also will give a credit based on this additional local tax liability. The State credit is 31.5% for each of the 12 years and is given against the same State taxes as the regular New Jobs Tax Credit (corporate or personal income taxes, the financial institutions franchise tax, or the insurance premiums tax).

Both the regular and enhanced State tax credits allow a business to “roll” the credit for up to five years. This means that if the State tax credit is higher than the amount of taxes due in any given year, your business can claim the difference for up to five years.

"Recapture Provision"

Both tax credits also contain a “recapture” provision that requires a business to repay the credits if they fail to maintain the job and space requirements for three years. This provision is applicable to each individual year, so that if a business maintains the minimum requirements for14 years, it will have to repay only the last (twelfth) year of the credit.

Enterprise Zone Tax Credit

The Enterprise Zone Tax Credit is available to businesses that locate in designated areas of downtown Silver Spring, Wheaton and part of Takoma Park/Long Branch. It is designed to spur economic growth, both jobs and construction, in these two Enterprise Zones. It is administered through the County’s Silver Spring Regional Center.

Eligibility

This real property tax credit is available only for nonresidential properties located within the Enterprise Zones.

Calculation

Like the New Jobs Tax Credit, the Enterprise Zone Tax Credit is based on growth in property assessments. However, under the Enterprise Zone law, personal property is not included. The “base year assessment” is the real property assessment for the year before any new construction or refurbishing is done. The credit is based on the increase in the assessment for each of the next 10 years compared to the base- year assessment. The credit itself will be given on the actual taxes that result from the increase in assessment.

The rate schedule for the Enterprise Zone Tax Credit is as follows:

Years 1 through 5: Credit = tax on 80% of the increase in the assessment compared to the base year.
Year 6: Credit declines to 70%
Year 7 Credit declines to 60%
Year 8: Credit declines to 50%
Year 9: Credit declines to 40%
Year 10: Credit declines to 30% and expires

State Enterprise Zone Tax Credit

The State of Maryland also grants a tax credit for businesses that locate in Enterprise Zones. However the State’s credit is for State income taxes and is related to the number of new employees (in the Enterprise Zone) that a business hires.

Calculation

A business is entitled to receive the State tax credit for each of its employees who work at least 25 hours per week and spend at least 50% of work time in the Enterprise Zone. For “economically disadvantaged” employees, the credit is $3,000 in the first year, $2,000 in the second year, and $1,000 in the third year. For each employee who is not economically disadvantaged, there is a one-time credit of $1,000.